FTSE +7 points at 7492
DAX -14 points at 12645
CAC -10 points at 5338
Euro Stoxx -3 points at 3592
Moody’s downgraded Chinese debt to A1 from Aa3 and revised the outlook from negative to stable. The Aussie, which is known as the best G10 proxy for the Chinese economy, has been the biggest loser against the USD among the major currencies. The AUD/USD consolidated below the 0.7500 level, after having traded at 0.7517 on Tuesday. The key Fibonacci resistance, 0.7540 (50% level on March-May decline), has not been breached on yesterday’s rise. The pair is back below the 38.2% retracement, 0.7490. The intra-day bias is negative and could encourage a deeper correction to 0.7430/0.7400.
The US dollar firmed against all G10 currencies after the presentation by the Office of Management and Budget Director Mulvaney revived optimism for Trump’s major tax cut plans. On top, the US PMI pointed at slightly softer manufacturing activity, yet a solid expansion in services sector in May, similar to France and Germany.
The US stock indices edged marginally higher on Tuesday. The Dow Jones gained 0.21%, the S&P 500 and the NASDAQ closed the session 0.18% and 0.08% higher respectively. Bank stocks (+0.92%) led gains in the Wall Street.
But the renewed suspicion about Trump-Russian ties amid the former CIA chief’s comments dented the USD appetite in the early hours of trading in Asia. The picture is better moving into the European open, yet the US equity futures refuse to build on top of the Tuesday session’s gains.
The DXY index held the bottom near the lowest levels since Donald Trump’s election, as the US yields improved to the highest levels in four days. The Federal Reserve (Fed) will release its May meeting minutes later in the day. Markets are ready to catch any clue regarding the likelihood of an interest rate hike at the FOMC’s June meeting.
Kashkari, known to be a member of the Fed’s dovish camp, said he would prefer to see more economic data before making a decision in June. He added that the balance sheet normalisation should bring some additional tightening, yet he doesn’t know by how much. The activity on the US sovereign markets price in a 100% probability for the June hike before the release of the minutes.
Gold retraced to $1,250. The key short-term support stands at $1,245 (200-day moving average & 38.2% retracement on April-May decline). A break below this level could encourage a further slide to $1,233 (23.6% retrace & 100-day moving average). The resistance is eyed at $1,265 (major 61.8% retracement), if surpassed should give a stronger base for a further bullish development toward $1.276 (minor 76.4% retrace) before $1,295 (April peak).
The improved risk appetite and softer yen pushed Japanese stocks higher in Tokyo. Nikkei (+0.52%) and Topix (+0.48%) gained, while Shanghai’s Composite (-0.80%) fell amid China’s debt rating downgrade brought forward the bad loan worries.
The FTSE closed Tuesday’s session below 7500p, after being unable to hold on to its gains at 7521p. Pound’s failure to break above the $1.30 and firmer oil markets hint at a marginally positive start in London today.
Marks & Spencer's (OTC:MAKSY) announced mixed results. The 4Q home and clothing sales fell by 5.9% versus -3.7 expected by analysts. The company said that 2017/2018 clothing and home space should decline by 1-2% and the gross margin should be +25 to -25 basis points. On the other hand, the FY adjusted profit before tax beat estimates, as company printed GBP 613.8 million versus GBP 596 million forecast. The company said that the cash generation reduced debt by GBP 204 million. The final FY dividend is announced at 11.9p per share.
Cable unsuccessfully tested the critical mid-term support at 1.3044, which stands for the major 38.2% retracement following the Brexit sell-off. The lack of conviction for a mid-term bullish reversal in the pound against the greenback hints at a deeper downside correction. The next supports stand at 1.2824 (minor 23.6% retracement on March – May rise), 1.2750 (50-day moving average) and 1.2687 (major 38.2% retrace).
The EUR/USD bounced back from 1.1268 yesterday. The euro could have temporarily topped gains against the greenback and the disappointment on the Greek bailout deal could suggest a continuation in the short-term pullback. The key support levels to the current positive trend are 1.1101 (minor 23.6% retracement on April – May rise) and 1.1000 (major 38.2% retracement)
Quick glance at technicals on LCG Trader:
EUR/GBP intraday: turning down. Short positions below 0.8650 (pivot) with targets at 0.8600 and 0.8570 in extension. Above 0.8650, upside potential to 0.8680 & 0.8700.
GBP/USD intraday: capped by negative trend line. Short positions below 1.3040 (pivot) with targets at 1.2935 and 1.2900 in extension. Above 1.3040, upside potential to 1.3090 and 1.3120.
Facebook (NASDAQ:FB) short-term: supported by a rising trend line. Long positions above 143.50 (pivot) with targets at 154.00 & 158.00 in extension. Below 143.50, downside potential to 138.00 and 133.00.